25 Various Factors Influencing Entrepreneurship (Explained)

Entrepreneurship, the process of creating and managing a new venture, plays a pivotal role in driving economic growth, fostering innovation, and creating job opportunities. Entrepreneurs are visionary individuals who identify market gaps, take calculated risks, and pursue innovative ideas to transform them into successful businesses. However, the journey of entrepreneurship is not without its challenges.

Various factors significantly influence the decision to become an entrepreneur and the ultimate success of entrepreneurial ventures.

These create the development of entrepreneurship or dynamism or flow of the entrepreneurs. Although this theory and assumption are faulty, it has been observed that in several countries, entrepreneurial development could not take place, in spite of providing all types of facilities and assistance.

Today, entrepreneurship development has become a necessity for All Nations.

The government in every country is paying attention to the development of entrepreneurs, by organizing various schemes and programs, providing incentives and facilities, and establishing various Institutions and organizations for entrepreneurial development.

But many factors influence entrepreneurship development. In fact, entrepreneurship development depends upon a good number of factors.

What are the Factors Influencing Entrepreneurship?

Following are the myriad factors that influence entrepreneurship, shedding light on the key drivers that foster an entrepreneurial ecosystem:

1. Personal Traits and Mindset

One of the fundamental factors influencing entrepreneurship lies within the individual. Certain personal traits and mindset characteristics can significantly impact a person’s propensity to become an entrepreneur. Key factors include:

a. Risk-Taking Propensity: Entrepreneurs are often willing to take calculated risks to achieve their goals. This willingness to embrace uncertainty and handle risk distinguishes them from conventional employees.

b. Vision and Innovation: Entrepreneurs possess a vision that goes beyond the status quo. They can identify opportunities and develop innovative solutions to address existing problems or meet unmet needs.

c. Persistence and Resilience: Building a successful business requires persistence in the face of challenges and the ability to bounce back from failures. Resilience is essential for navigating the ups and downs of entrepreneurship.

d. Creativity and Adaptability: Entrepreneurs need to think creatively and adapt quickly to changing circumstances and market demands. Being able to pivot when necessary is crucial for survival and growth.

e. Independence and Autonomy: The desire for independence and the ability to be one’s own boss motivate many individuals to pursue entrepreneurship.

2. Motivational Factors

Motivation plays an important role in entrepreneurship development.

It is an important internal desire and force, which inspires him to take up entrepreneurial work and encourages him to achieve his goals.

Entrepreneurial motivation helps in entrepreneurship development. Achievement motivation, power motivation, and expansion motivation are important factors.

Achievement motivation Lays emphasis on the extent of the desire of an individual for obtaining achievements, bringing out new, and demonstrating excellent work efficiency.

If he has the interest, temperament, and commitment, he will be inspired to establish an enterprise, otherwise not.

Similarly, Under the power motivation, entrepreneurs have the desire to influence other persons and keep control of them. It will motivate them to go ahead.

Thus, the desire of the individual determines the level and development of entrepreneurship.

• Persons who have individual effectiveness or the ability and quality to influence the situations, then they may easily be motivated towards Entrepreneurship.
• An Entrepreneur has to accomplish various functions, like the establishment, management, and operations of the industry. He has to remain alert against various challenges and external forces and has also to bear various pressures and stresses.

In such a situation, the individuals who have the capacity to struggle, have the potential to become an entrepreneur.

3. Education and Skills

The level of education and skills possessed by individuals significantly affects their inclination toward entrepreneurship.

Education equips aspiring entrepreneurs with knowledge, critical thinking abilities, and problem-solving skills, which are essential for identifying and pursuing business opportunities.

Additionally, specialized training programs, workshops, and mentorship initiatives can enhance entrepreneurial skills and knowledge.

A well-rounded education system that fosters creativity, innovation, and entrepreneurship can play a significant role in encouraging individuals to embark on entrepreneurial ventures.

4. Entrepreneurial Skills

An entrepreneur requires various types of skills, like human, business, managerial, and Technical for success.

Entrepreneurial development may be easily encouraged by developing these skills in entrepreneurs.

The following three types of skills are necessary for an entrepreneur:

1. An Entrepreneur should have project skills for establishing an industry, he has to collect various facts and information, formulate projects, consider various stages of projects, and make investment decisions.
2. The entrepreneur should have the managerial ability for successful management and operation of the industry. He has to manage work planning, organize various activities, take effective decisions, communicate skillfully, provide directions, exercise effective control, etc.
3. An entrepreneur must have the ability of Creative Thinking and ability to Grab opportunities, in order to establish his distinct identity in the industry.

5. Entrepreneurial Knowledge

Entrepreneurial knowledge is also an important factor in determining entrepreneurial.

Such knowledge helps them in framing strategies relating to the industry by making use of their skills.

Entrepreneurs require knowledge of the following three areas:

• He should have knowledge of physical, social, cultural, political, legal, technological, and ethical factors of the environment.
• He should have knowledge about various issues, relating to the alternatives industries: the best alternative amongst various alternatives; raw material to be used- foreign or domestic, production process, distribution of products, competitive firms, etc.
• After selection of the best industry, the entrepreneur should have detailed knowledge of various Technological aspects, like suitable production techniques, costs, and likely profits, of the industry to facilitate the development of entrepreneurship.

6. Access to Capital

Access to capital is often cited as one of the most critical factors influencing entrepreneurship. Starting a business requires financial resources for product development, marketing, operational expenses, and expansion.

Entrepreneurs often face challenges in securing funding, especially in the early stages of their ventures.

Factors such as personal savings, angel investors, venture capitalists, government grants, and access to loans or credit facilities can significantly impact an entrepreneur’s ability to launch and grow their business.

The availability of funding opportunities can make a significant difference in the success and sustainability of an entrepreneurial venture.

7. Normative Behaviour

Normative behavior has three aspects namely bearing of risks, family expectations and pressures, self-dependence and work culture, etc.

Which influences entrepreneurship development:

1. The person’s tendency to bear risks and uncertainties implies that they are not afraid of challenges and responsibilities. They work hard and these facilities prefer entrepreneurial development.
2. Family expectations or motivations also have an important role in entrepreneurship development. If the head of the family and other members desire to earn a good amount of wealth by doing Independent work and engaging all family members then it gains a social reputation, so the establishment of own enterprise increases.
3. The Desire of a person to lead Independent and self-dependent life is also helpful in making a man entrepreneur and it facilitates overall entrepreneurship development. Such persons believe in self-employment. Hence, persons having such a desire to become successful in the establishment of an enterprise in project works, even without suggestions, directions, and guidelines, from others.
4. Work culture is the base for entrepreneurship development. In societies, where people believe in ‘work is worship’, intense desire to work, and has an interest and love for work, the development of the entrepreneur is fast and substantial. On the contrary, the persons who believe in luck, have no Desire and concern for work and avoid activeness, push entrepreneurship backward. In such situations, entrepreneurship development is very difficult.

8. Socialization

In a society where commitment to achievement is taught formally or informally in schools, religious organizations, political parties, and educational institutions.

The qualities to accept challenges the entrepreneurial development is substantially high and faster.

The following socialization factors are significant in entrepreneurship development:

1. Feelings for achievements and contractive achievements have an effect on entrepreneurship development in a highly positive manner. If it is not so, it will adversely affect entrepreneurship. As a result, the establishment of the enterprise is difficult and problems develop even in respect of exiting Enterprises.
2. The base of entrepreneurship can be built by providing training through socialization. This training may be provided in two ways social training of self-dependence and training of initiations to youth, etc.

As a result, the self-dependence of people will increase and they will start the establishment, development, and expansion of the enterprise. But, it should be kept in mind that neither excessive security be provided to them, nor excessive directions are provided.

Otherwise, they will never take an interest in working independently.

They will often wait for someone who may be provided reasonable guidance and security.

9. Supportive Ecosystem

A strong entrepreneurial ecosystem is vital for fostering innovation and encouraging entrepreneurship.

This ecosystem encompasses various elements, including incubators, accelerators, co-working spaces, networking events, and supportive regulatory frameworks.

These elements can provide aspiring entrepreneurs with the necessary resources, mentorship, and guidance to navigate the challenges of starting and running a business.

Additionally, collaboration among universities, research institutions, government agencies, and industry stakeholders can lead to a dynamic ecosystem that promotes knowledge exchange and technology transfer.

10. Economic and Business Environment

The economic environment is a crucial factor that influences entrepreneurship. A stable and prosperous economy can encourage entrepreneurship by providing access to financial resources, favorable market conditions, and a higher demand for new products and services.

Low-interest rates, government incentives, and supportive policies can also foster an entrepreneurial ecosystem.

Economic and business environment, economic stability, competition, trade cycles, prices, income levels, investments and savings position of the market, market competition, and Monopoly market, imperfect competition, capital market transportation, and communication awareness towards the environment, quality of entrepreneurs and innovations, etc.

Besides, various sections of society, Like consumers, suppliers, workers, employees, investors, and debenture holders, etc. also have an important role in entrepreneurship development.

11. Government Policies and Incentives

Various economic and business policies of the government, like industrial policy, Licensing policy, agriculture policy, monetary and fiscal policy, Labour policy, Export-Import policy, etc. also influence entrepreneurship development.

If the economic policies of the government are suitable, progressive, and sound, these may encourage entrepreneurship development.

The government may attract entrepreneurs by making them aware of its positive approach towards enterprises/Industries through these policies and by providing them the incentives and facilities etc.

The government may also attract entrepreneurs to backward villages and areas also by announcing and providing special concessions facilities and assistance, in addition to general incentives.

These incentives help in increasing production, income, savings, investments and capital formation, and the ultimate development of the country.

12. Cultural and Social Norms

Cultural and social norms play a significant role in shaping an individual’s perception of entrepreneurship. In societies where risk-taking and failure are stigmatized, aspiring entrepreneurs may be discouraged from pursuing their business ideas.

On the other hand, cultures that celebrate innovation, ambition, and success may foster a more entrepreneurial mindset.

Family support also plays a vital role in an individual’s decision to become an entrepreneur.

A family that values entrepreneurship and encourages risk-taking can provide the necessary emotional and financial backing to aspiring entrepreneurs.

13. Economic Laws

Economic laws and rules also affect entrepreneurship development.

Such laws and rules include Monopolies Restrictive and trade practices Act, Labour laws, business laws, industrial laws, and acts relating to various taxes, like Income Tax, sales tax, wealth tax, and various other laws and rules.

The government provides impetus to economic activities by framing practical and useful laws and rules.

These also provide the safeguard to the entrepreneurs for their business, wealth, and property. Besides, law and order also be managed by the government to sustain Industrial Development.

The government may also make the rules and laws more effective for the establishment of industries. Thus, a conducive legal environment may be built for entrepreneurial development.

14. Scientific and Technological Development

Technology, technological activities, and Technical research available in the country result in scientific and technical development, which also influence entrepreneurship.

Various new scientific inventions and technical development contribute to agricultural and industrial development.

Advancements in technology have revolutionized the entrepreneurial landscape:

Through various new production methods, mount up production in the country, the cost of production costs of production reduces, the production of new products becomes possible and the search for new raw materials and new markets is easily facilitated.

All this ultimately affects the development of entrepreneurs.

If the government pays adequate attention to the technical development of the country, the development of entrepreneurs is quite fast and substantial.

15. Political and Administrative System

The Political and Administrative System of the country also influences entrepreneurial development.

Various factors and conditions, Like the approach of the government (communist, socialist, dictatorial) policies concerning public welfare and Social Justice, donations, gifts received by political parties and public leaders from business Institutions, political stability, defense policy for national security, foreign policy, bureaucracy, government policies and rules, National Prestige, etc.

Constitute political and administrative systems.

For example, liberal policies and practical rules for setting up industries will encourage Development of the entrepreneurs.

If the policies and rules are complex and cumbersome, no entrepreneur will come forward to establish the industries.

In addition, if the Bureaucracy is corrupt, entrepreneurial development will not be possible.

16. Attitude of Big Entrepreneurs

Attitude has a direct or indirect role in entrepreneur development.

The positive attitude of the existing big entrepreneurs encourages and the negative attitude discourages the small entrepreneurs.

If the Big Entrepreneur uses various types of facilities, like raw materials, semi-finished products, Machinery, Tools, Finance, Management services, advice, etc. Available to small entrepreneurs, then they get encouraged.

Besides, they may also solve various problems of small entrepreneurs.

Such a type of attitude encourages the development of entrepreneurship, otherwise, attitude discourages the small entrepreneurs.

17. Regulatory Environment

The regulatory environment can significantly influence entrepreneurship by either facilitating or hindering business formation and operation.

Excessive bureaucracy, complex tax systems, and stringent regulations can burden startups and small businesses, making it challenging for them to compete with larger, established firms.

Conversely, supportive regulatory frameworks that simplify business registration, reduce compliance costs, and protect intellectual property rights can foster a conducive environment for entrepreneurship.

18. Infrastructural Facilities

The government provides various infrastructural facilities for entrepreneurship development.

These include the supply of raw materials, communication, roads, water, electricity, construction of Industrial Areas, Supply of sources of energy, Insurance, godowns, financial services, etc.

19. Mechanism of Identifying and Developing Entrepreneurs

In every society, potential entrepreneurs always exist.

A society that is capable of identifying the entrepreneurial potential of its young generation may develop their entrepreneurial feelings by engaging them in creative activities.

But, it is the duty of society and its members not to make partiality.

In India, the identification and development of new entrepreneurs is now the responsibility of district industry centers.

20. Entrepreneurship-Oriented Education System

Educational institutions are contributing to the development of entrepreneurial tendencies of entrepreneurs.

These include schools, colleges, universities, Technical Institutes, management institutes, entrepreneurial development institutes, etc., which conduct various business and entrepreneurship-oriented courses.

In these courses, detailed and useful knowledge is provided regarding the role of entrepreneurial functions, the establishment of business enterprises, their management, and operation, preparation of project Reports and entrepreneurship, etc.

Thus, entrepreneurship may be developed by the expansion and publicity of business and technical education in our country.

21. Market Demand and Trends

Market demand and trends have a direct impact on entrepreneurship. Identifying unmet consumer needs and emerging trends can lead to successful business ventures.

Entrepreneurs who can anticipate and adapt to changing market demands stand a higher chance of success.

22. Role of Banks and Specific Financial Institutions

A good number of banks and specific institutions have been established with the objective of the development of entrepreneurship.

Entrepreneurial Development Institute, Entrepreneurship development boards, National Research and Development Corporation(NRDC), National Entrepreneurship and small business development institute, Nationalised and commercial banks, and state financial corporations have played a significant role in entrepreneurship development.

These banks and Financial Institutions encourage Entrepreneurship by way of providing finances at concessional rates, Approving the projects of the entrepreneurs quickly, and providing loan facilities for Research and investigation, etc.

Not only that, banks and specific Institutions provide refinance credit facilities to sick units and also provide them with the required advice.

23. Training Facilities

Various organizations and Institutions conduct training programs for the development of entrepreneurial abilities and capacities among people.

Under these programs, the exchange of thoughts, ideas, and experiences takes place, and conferences, seminars, and group discussions are held.

Thus, entrepreneurial training institutes have a distinct role in the development of entrepreneurship.

24. Supporting Institutions

The government has established various types of supporting institutions, Agencies, and organizations for entrepreneurial development.

The functions of these institutions are to provide assistance to the entrepreneur in marketing, management, raw materials, machinery, training, exports, modernization, and other matters.

These institutions and Agencies also provide services of surveys, Technical Education, business counseling, machine designing, product development, research projects, development, investigation, etc.

Through such types of functions and services, entrepreneurship is developed.

25. Research and Literature

Research Institutions also have an important role in entrepreneurial development, like National Investigation and Development Corporation.

The main function of this Institute is to help technological development.

It is the liaison with technology development Institutions and prepares a vast sock of Made in (Country Name) technology emanating from various research activities carried out by various Research and Development Institutes.

In addition, Research institutes carry out research problems and publish them, which is helpful in the development of entrepreneurs in the country.

Through entrepreneurial literature and research, entrepreneurs get guidance for setting up enterprises.

It attracts the young generation towards entrepreneurship.

Conclusion

Entrepreneurship is a complex interplay of personal attributes, economic conditions, cultural attitudes, and technological advancement.

Successful entrepreneurs possess a unique combination of passion, vision, and resilience, coupled with relevant knowledge and experience.

Moreover, supportive economic and cultural environments, coupled with technological advancements and market opportunities, can significantly influence the decision to embark on the entrepreneurial journey.

By understanding and addressing these multifaceted factors, governments, and organizations can foster a conducive environment for entrepreneurship, thereby driving innovation, job creation, and economic growth.